As
AIG's largest individual shareholder, I am as concerned as millions of other
investors as I watch the deterioration of a great company. As you
know, I am also Chairman of Starr International, AIG's largest
shareholder.

AIG
last week announced a net loss for the first quarter of 2008 of $7.81 billion,
or $3.09 per diluted share. It is the worst performance in AIG's approximately 40-year history
– and follows almost equally poor results
from last quarter, which was the worst quarter in the company's history before this
quarter. Over the last twelve months, shareholders of AIG have lost $80
billion in the aggregate.

Several top shareholders of AIG have called me expressing deep
concern about the persistent and seemingly endless destruction of value at
AIG. They, and I, are deeply distressed by the excessive loss of
value.

The facts are disturbing, for
example:

- On December 5, 2007,
management announced that
the cumulative decline in the value of its super senior credit default swap
portfolio was between $1.4 and $1.5 billion as of November 30,
2007;

- On February 11, 2008, that same
estimate was increased by $4.5 billion to approximately $6.0 billion, and the company announced
that the auditors found a material weakness in its internal controls over
financial reporting and oversight;

- On February 28, 2008 (two weeks
later), the company updated its estimate to reflect further valuation
declines through December
31, 2007, and increased the cumulative valuation loss to $11.5 billion on the
same portfolio. Leadership reiterated, however, that the company had
$15 to $20 billion of excess capital;

- With the release of first
quarter earnings on May 8,
2008, AIG announced that the portfolio lost an additional $9.1 billion in value -- and the
company would need to raise $12.5 billion in capital.

These
events have led to a complete loss of credibility with the investment community
and even further loss of value for shareholders.

AIG
has not articulated why it has chosen to raise approximately $12.5 billion in
the capital markets rather than pursuing other paths, such as the divestiture of
non-core assets (several specific options spring to mind) or the infusion of
capital from sovereign wealth funds or private equity funds – paths pursued by
other large, diversified U.S. financial institutions. Shareholders deserve to
know how this decision was reached and what other alternatives were considered
and evaluated.

At
the same time as it announced that it would raise new capital, AIG announced an
increase in the dividend by 10%, to 22 cents per share. This is expected to cost
over $200 million on an annualized basis. Furthermore, capital
continues to be needlessly consumed through the conversion of branch operations
into subsidiaries in various jurisdictions – simply ending this practice would
help shore up the company's capital.

The
company's problems are more than financial and extend far beyond its subprime
credit exposure or approach to capital management. Core businesses
are also deteriorating. U.S. life operations are
stagnant. The company has lost its leading and unique market
positions in China and Japan. The life business in Asia had been a
crown jewel, but now the company's position has eroded. In Taiwan,
the company must now find up to an additional $1 billion to cover
losses. To what extent are Taiwan losses due to regulatory changes,
as has been suggested, and to what extent are they attributable to the failure
to hedge certain non-Taiwanese dollar denominated investments? The
company's general insurance loss ratio is up from 64.2 to 70.4, and the expense
ratio is up 3.1 points on a quarter-on-quarter basis, from 23.3 to
26.4. At the end of
2004, it was approximately 20. Lastly, in the more than three years
since I left, AIG has added 24,000 employees, many in cost center functions.
This is the equivalent of two Army divisions.

AIG
is in crisis. The company's shareholders need to absorb the significance of the
company's first quarter losses. They also need time to consider the
board's response to the crisis and the issues raised by this
letter. For this reason and others, a postponement of this
week's annual meeting should be considered, so that all shareholders can give
careful thought to how best to move AIG forward.